BUS3003: Global Business Development - FDI and Market Entry Strategy

This report analyzes the international business strategy of River Island, a high-street fashion brand, focusing on its potential expansion into Cambodia. The report begins with an overview of River Island and its selected product, Print t-Shirts from the men's collection, and the rationale behind choosing Cambodia as a developing market. The analysis includes a detailed examination of Cambodia's demographics, culture, competitive landscape, GDP growth, and ease of doing business, highlighting the suitability of River Island's product for the Cambodian market. The report then discusses the transnational business strategy as a suitable international business strategy for River Island, considering its adaptability and ability to cater to local preferences. Furthermore, it explores foreign direct investment (FDI) as an entry mode, specifically merger and acquisition, evaluating their benefits and drawbacks. The report concludes with a reflection on the assignment's key takeaways and implications for international business expansion, providing a comprehensive overview of the challenges and opportunities associated with entering the Cambodian market.

Running head: MARKETING MANAGEMENT
MARKETING MANAGEMENT
Name of the student
Name of the university
Author note

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Table of Contents
Part A...............................................................................................................................................2
1. Background of the organization and product selected.................................................................2
1.1 Background of River Island...................................................................................................2
1.2 Background of the selected product......................................................................................2
2. Choice of the developing country (Cambodia)............................................................................3
2.1 Demographics........................................................................................................................3
2.2 Culture...................................................................................................................................3
2.3 Nature of competition............................................................................................................4
2.4 GDP growth...........................................................................................................................4
2.5 Ease of doing business index.................................................................................................5
3. International business strategy.....................................................................................................5
4. Foreign direct investment as entry mode.....................................................................................7
5. Strategy that might be utilized by the River Island.....................................................................9
Part B: Reflection on the assignment.............................................................................................11
References......................................................................................................................................12
Appendix........................................................................................................................................15

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Part A
1. Background of the organization and product selected
1.1 Background of River Island
The concerned organization, River Island, is a high street fashion brand, which is located
in London. The organization operates in a number of worldwide markets since its establishment
in the year 1948 (Riverisland.com. 2019). The different research and development activities that
are undertaken by the organization have helped the same in maintaining the efficiency of the
product design as per the study of the market trends. It has helped the business in attracting the
attention of huge number of customers in the global markets.
The revenue that was earned by the organization was £944.5million and the operating
income of the business was around £80.6million computed in the financial year 2017
(Riverisland.com. 2019). The development of the organization in the different developing
economies has helped the same in maintaining a steady rise in its net profits since its inception.
On the other hand, the price of the proposition corresponded to the needs of most of the people,
as they are not exclusive and expensive.
1.2 Background of the selected product
The product that will be considered in the research is the Print t-Shirts of the Street
fashion apparel for men collections, which is manufactured by River Island. The specialty of the
Printed t-Shirts is that the customers might customize the contrast and color of the t-Shirts as per
their choices (Riverisland.com. 2019). The organization priced the t-Shirt for £12 only which
might be taken as the most attractive feature for gaining the attention of the customers

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(Riverisland.com. 2019). The target customers of the organization are the students and the
venture aimed at providing 10% discounts to the students, which has helped the business in
maximizing the sales volume in the developing countries (Riverisland.com. 2019).
The organization aimed at providing the customers with apparels that might be utilized
regularly. The fabric that is being used in the apparel is tough for enduring the regular wear and
tear purposes. It has helped the business in gaining the attention of the customers. On the other
hand, the wider availability of the apparels in the ordinary shops has helped the organization in
making its product range available to large amount of target customers. Therefore, the better
quality of the product offering has helped the business in gaining the attention of large number of
customers towards the product offerings while making business in the developing countries.
2. Choice of the developing country (Cambodia)
2.1 Demographics
The population of Cambodia is around 16,245,729 as computed in the year 2018. The
nation ranks 72 in global population (Sothan 2018). The yearly growth rate of the nation is
1.46% as was computed in the year 2019 (Sothan 2018). The population growth of the nation is
surpassed by the higher rate of unemployment, which has affected the capabilities of the nation
to bring forth improvements in the industrial sectors. The continuous growth of population in the
nation has affected the capabilities of the same in developing the resources while competing in
the international markets. The needs of development have enabled the Cambodians in accepting
the diverse product offerings made by the foreign firms.

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2.2 Culture
The major source of cultural inspiration in the nation is dependent on the development of
unique Khmer. The spiritual and culture development of the nation is largely dependent on the
beliefs related to Animism (Sandberg 2013). On the other hand, the basic religious beliefs of the
nation depended on the essence of Buddhism and Hinduism. The deep rooted resilience in the
Cambodian culture is mostly influenced from the Khmer culture. The developments that are
made by the Cambodians while combating the higher rate of population and the lower standard
of living has helped in stabilizing the GDP (Lee, Biglaiser and Staats 2014). On the other
hand, the positive outlook of the Cambodians will help the international organizations in making
business in Cambodia. Moreover, Lindsay, Rod and Ashill (2017) stated that there is a higher
rate of acceptability among the Cambodians which will support the initiatives of foreign
investments and market entry by the foreign companies. Therefore, the Cambodian culture will
permit the entry of the concerned organization in the markets.
2.3 Nature of competition
The market structure of Cambodia is Monopolistic Competition where a large number of
firms undertake differentiated operations as per the needs of the customers (Sothan 2018). In
this relation, the garment- manufacturing sector of the nation includes companies like Dewhirst
Garment Factory, Wai Full Garments Ltd. and Eclat Highter International Garment Co. Ltd
(Raff, Ryan and Stähler 2012). The different competitors in the Cambodian markets have
brought about changes in the proposition and the quality of the products. The monopolistic
competition structure of the nation has helped the nation in undertaking different imports from
the foreign markets. It will be helping the concerned organization in making business efficiently,
despite of all the competitions in the Cambodian markets.

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2.4 GDP growth
The GDP growth of Cambodia is projected to be slightly accelerating to 6.9% in 2018
against 6.8% in 2017 (Sothan 2017). The growth of the GDP of the nation is dependent on the
development of the textile and apparel exports. The nation undertakes 65% exports related to
textiles and apparels which has helped the nation in maintaining the efficiency of productivity as
per the concerns of expanding in the international markets (Sothan 2017). On the other hand,
the growing rate of GDP has helped in supporting the lifestyle of the people, which will b
helping the concerned organization in locating potential buyers.
2.5 Ease of doing business index
Cambodia ranked 138 in respect to the ease of doing business as per the reports published
by the World Bank (Sothan 2017). It might affect the concerned organization’s capabilities of
undertaking business in the Cambodian markets.
3. International business strategy
The organizations might employ transnational business strategy in order to address the
needs of businesses relating to international expansion (Lee, Biglaiser and Staats 2014). The
transnational business strategy combines the different aspects of the global and multi-domestic
strategies, which will be helping the organizations in attracting the attention of a huge customer
base towards the propositions. De Villa, Rajwani and Lawton (2015) stated that the
transnational business strategy would enable organizations to establish their headquarters in its
country of origin while assisting the businesses in undertaking full- scale operations in the
foreign markets. On the other hand, Laufs and Schwens (2014) noted that the transnational
strategy assists the organizations in undertaking the decisions, productions and sales in the

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individual foreign markets. It supports the organizational initiatives of understanding the
different demand of the customers, which varies from nation- to- nation.
The delineation of the transnational business strategy in the organizational context helps
an organization in maintaining the efficiency of the operations while making an expansion in the
foreign markets (Ripollés, Blesa and Monferrer 2012). Moreover, the strategy supports the
organizational initiative of establishing separate R&D departments and production processes as
per the needs of the target customers. The customizable qualities of the strategies help an
organization in following an agile expansion process, which, largely depends on the capabilities
and competencies of the business. Raff, Ryan and Stähler (2012) stated that the transnational
business strategy helps organizations in adhering to the preferences of the local customers while
developing the range of propositions.
Moreover, Sandberg (2013) also noted that the transnational business strategy helps the
organizations in revising the price structure and the product offering as per the study of
demographic structure and social needs. Therefore, the implementation of the transnational
business strategy by the organizations helps the same in maintaining the efficiency of the
operations in accordance with the study of demographics and the competition faced by the same
in the different economies (De Beule, Elia and Piscitello 2014). On the other hand, the costs
and the pricing structures that are adhered by the organizations are dependent on the legal and
regulatory concerns. The strategy helps organizations in maintaining the agility of the operations
as per the objectives of the business.
However, Hilmersson and Jansson (2012) noted that the transnational business strategy
is a complex process which requires an organization to undertake relative actions for reducing

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costs and establishments in the different foreign markets. Tekin-Koru (2012) also criticized the
strategy to be costly as it requires huge CAPEX for establishing different R&D departments in
the foreign markets. However, Game and Apfelthaler (2016) opined that the implementation of
the transnational strategy helps businesses in adhering to the different needs of the customers in
the foreign markets, which helps the business in gaining a huge customer base and a competitive
advantage. Therefore, the transnational strategy has both pros and cons, which is portrayed
through the capabilities and competencies of the organizations to invest on the different
prospects for gaining a better coverage of customers.
4. Foreign direct investment as entry mode
Merger and Acquisition helps an organization in entering the international markets
directly. A merger is undertaken by organizations in order to combine the resource and
capabilities of both the entities to form a single business venture (Lee, Biglaiser and Staats
2014). The application of merger while making an expansion will be helping an organization in
increasing the market share and gain economies of scale. On the other hand, the merger helps an
foreign organization in reducing the level of risk of operations while operating in an international
market context. Schuster and Holtbrügge (2012) stated that merger helps an organization in
enhancing the financial capabilities and thereby boosting the operations as per the needs of the
business. On the other hand, Mihailova and Panibratov (2012) noted that the merger activity will
help organizations in reducing competition in the foreign markets which might lead to higher
priced propositions to the customers.
However, the overall success factors of an organization, which is planning to undertake a
merger with a foreign company while making an expansion is based on the factor of equal

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distribution of risks (Mihailova and Panibratov 2012). It will be helping the guest company in
reducing the level of risks for facilitating the smooth operations of the business venture. On the
other hand, Lindsay, Rod and Ashill (2017) stated that merger helps the guest organization in
reducing the costs relating to market research. The host company, with which the guest company
is looking forward to merge, holds a complete knowledge of the needs of the customers.
Therefore, the guest company is not required to invest for undertaking market research, which
will help the business in reducing the operational costs and maximize the profit margins.
Strategic acquisition is undertaken by organizations in order to take over the host
company and thereby create powerful synergies to uphold the efficiency of the operations as per
the concerns faced by the business. Alvarez, Marin and Santos‐Arteaga (2015) stated that
acquisition is undertaken by companies who are in a rush of expanding to the different
international markets. The developments in the processes of an organization are dependent on the
priorities that are faced by the same. Acquisition provides an organization with an option of
making a dynamic expansion in the different foreign markets (Mihailova and Panibratov 2012).
On the other hand, acquisition that is undertaken by the companies helps the same in enhancing
the rate of financial gains through ready market.
Buckley, Elia and Kafouros (2014) noted in a research that an organization takes over a
host company with the view of gaining the customer base of the same with minimal expense of
resources. The guest organization utilizes a minimal amount of resources while making a steady
acquisition in the host nation. However, there are different issues that might be faced by the
guest organization while undertaking an acquisition related to unrelated diversification of the
needs of the customers (Lindsay, Rod and Ashill 2017). It might affect the competitive
advantage of the concerned guest business while operating in a foreign market. On the other

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hand, Sothan (2017) stated that acquisition of a reputed company by the guest venture might
result to enhancement in the brand image and loyalty of the customers. It will be helping the
concerned organization in maintaining the efficiency of the operations as per the needs of the
business.
5. Strategy that might be utilized by the River Island
The concerned organization, River Island, might undertake Cost Leadership strategy
from the list of Porter’s Generic strategies, which will help the organization in reducing the
price of the offerings to attract the attention of maximum number of customers in the Cambodia.
Cost Leadership will be helping the organization in enhancing the competitiveness of the same
and minimizing the risk factors while expanding in the foreign market. On the other hand, Cost
Leadership will be providing the organization with loyal potential customers for the propositions
made by the same in Cambodia. Hilmersson and Jansson (2012) stated in a research that Cost
Leadership supports the operations of an organization in attracting the attention of potential
customers.
The Cost Leadership strategy will support the R&D initiatives of the concerned
organization while developing the line of high street fashion apparel as per the preferences of the
customers (Hilmersson and Jansson 2012). The development of the products as per the needs of
the customers will be helping the organization in retaining large amount of target customers. On
the other hand, De Beule, Elia and Piscitello (2014) noted that the Cost Leadership helps an
organization in enhancing the market share of the concerned organization that might result to
growing competitive edge of the business venture. In this relation, River Island will be

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benefitted through the Cost Leadership, as it will help the business in maximizing the target
customer base.
Game and Apfelthaler (2016) stated that Cost Leadership helps an organization in
minimizing the competition that might be otherwise faced by the same while expanding in a
foreign market. Cost Leadership will help River Island in minimizing the steady competition that
could have been encountered by the same through the existence of a huge number of cloth
manufacturers in the Cambodian markets. The Cost Leadership will help the concerned
organization in gaining the economies of scale and thereby increase the market share through
collaborated functioning with the host organization (Hilmersson and Jansson 2012). The Cost
Leadership will assist the organization in upholding the efficiency of the operations as per the
needs of the same relating to the enhancement in the goodwill. Laufs and Schwens (2014) stated
that the Cost Leadership helps an organization in achieving the long term objectives through
maximization of goodwill. On the other hand, the implementation of Cost Leadership will be
helping the concerned organization in receiving tax benefits from the Cambodian government.
The tax benefits will support the organization in reducing the operational costs and revising the
pricing structure for the value propositions (Ripollés, Blesa and Monferrer 2012). Therefore,
the concerned organization might undertake Cost Leadership as the most strategy for establishing
a successful business relation with Cambodia.

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